Competition in funding higher education

Arbeitspapier

In higher education pure credit market funding leads to underinvestment while income-contingent loans funding tends to produce overinvestment. We analyze whether a market structure in which both funding schemes coexist and compete against each other might restore efficiency of the educational investment process. In the absence of government intervention, we find that funding competition does not rectify the investment inefficiency nor will it improve pooling of individual income risks. However, a policy which allows the two financing schemes to compete and which, at the same time, restricts access to higher education can achieve investment efficiency and improve risk pooling. We find that the equilibrium with funding competition and restricted participation yields the highest level of social welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3588

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Fiscal Policies and Behavior of Economic Agents: Household ; Educational Finance; Financial Aid
• Subject: higher education ; funding competition ; human capital formation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eckwert, Bernhard ; Zilcha, Itzhak
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/52435
• Last update: 10.03.2025, 11:44 AM CET